Key GOP lawmaker backs Powell for another term as Fed chief

The top Republican on the House Financial Services Committee on Wednesday called on President Biden to renominate Jerome Powell as chair of the Federal Reserve board.

In opening remarks during a Wednesday hearing with Powell, Rep. Patrick McHenry (R-N.C.) — the panel’s ranking member — said the Fed chief “earned and deserved another term” leading the central bank.

“There’s a great deal of uncertainty right now,” McHenry said. “You have proven to be a steady hand throughout this pandemic and ongoing recovery, and you’ve defended the independence of the Fed. Thank you for your service. Thank you for your leadership.”

“Now, we’re going to spend the next three hours telling you everything you’ve done wrong, but you do deserve another term,” he continued.

McHenry’s endorsement comes as Biden weighs whether to renominate Powell, a Republican elevated to lead the Fed by former President Trump in 2017. 

The Fed chief is widely liked and respected among lawmakers in both parties for standing up to Trump’s attacks on the central bank’s independence and leading the Fed’s successful efforts to stabilize financial markets during the onset of the coronavirus pandemic. Democrats also praised Powell for his thinly veiled support of a major fiscal response to the pandemic, while Republicans have backed his efforts to pare back some Dodd-Frank regulations.

Rep. Maxine Waters (D-Calif.), the panel’s chairwoman, has not explicitly backed another term for Powell but has effusively praised him during several recent committee hearings. 

Even so, Biden is facing pressure from progressives and financial sector critics to appoint a new chair more closely aligned with his politics. 

Only senators vote on nominations, but McHenry’s endorsement suggests Powell would receive broad GOP support in the Senate despite mounting Republican concerns over inflation. 

The Labor Department reported Tuesday that the consumer price index, a key gauge of inflation, rose 0.9 percent in June and 5.4 percent in the 12 months leading into last month — each the highest rate since 2008. While consumer prices were widely expected to keep rising, inflation spiked far faster than the consensus 0.5 percent increase projected by economists.

Powell, however, expressed confidence that inflation would cool off as several short-term factors pushing prices higher began to fade out of the economy.

“Strong demand in sectors where production bottlenecks or other supply constraints have limited production has led to especially rapid price increases for some goods and services, which should partially reverse as the effects of the bottlenecks unwind,” Powell said.

“Prices for services that were hard hit by the pandemic have also jumped in recent months as demand for these services has surged with the reopening of the economy.”